Promissory note between Heartland Financial USA, Inc. and Bankers Trust Company dated as of April 20, 2011, including Loan Commitment Letter dated April 5, 2011

 

Unless otherwise agreed or required by applicable law, payment will be applied first to any unpaid collection costs; then to any late charges; then to any accrued unpaid interest; and then to principal. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the 30-Day London Interbank Offered Rate (LIBOR) as published in The Wall Street Journal which may or may not necessarily reflect the rate Lender charges to its other customers which may be lower (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current index rate upon Borrower's request. The interest rate change will not occur more often than each last day of the month. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 0.243% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate of 2.750 percentage points over the Index resulting in an initial rate of 2.993% per annum based on a year of 360 days. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increase Borrower's payments to ensure Borrower's loan will pay off by its original final maturity date, (B) increase Borrower's payments to cover accruing interest, (C) increase the number of Borrower's payments, and (D) continue Borrower's payments at the same amount and increase Borrower's final payment.

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts,

including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Bankers Trust Company, 453 7^th Street, P.O. Box 897, Des Moines, IA 50304-0897.

LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $50.00, whichever is greater.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased to 21.000% per annum based on a year of 360 days. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

DEFAULT. Each of the following shall constitute an event of default (“Event of Default”) under this Note:

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note end all accrued unpaid interest immediately due, and then Borrower will pay that amount.

ATTORNEY'S FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including without limitation all attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Polk County, State of Iowa.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves the right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower hold jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the debt against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.

COLLATERAL. This loan is unsecured.

PURPOSE OF LOAN. The specific purpose of this loan is: Capital Injections into Subsidiaries and other General Corporate Purposes; Refinance existing debt.

ADDITIONAL TERMS. This credit is subject to the terms and conditions of a Loan Commitment Letter dated April 5, 2011.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Borrower may notify Lender if Lender reports any inaccurate information about Borrower's account(s) to a consumer reporting agency. Borrower's written notice describing the specific inaccuracy(ies) should be sent to Lender at the following address: Bankers Trust Company 453 7^th Street Des Moines, IA 50309.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.

 

 

By:     /s/ John K, Schmidt                

John K. Schmidt, EVP, CFO of Heartland Financial USA, Inc.

 

 

 

This Addendum is incorporated into and made part of the attached Loan Commitment Letter dated April 5, 2011, between Lender and Borrower. In the event of a conflict between the terms of this Addendum and the Term Loan Commitment Letter, the terms of this Addendum prevails.

 

Borrower has agreed to hedge its obligations under the Note through the use of one or more interest rate hedging agreements pursuant to that certain ISDA Confirmation Letter dated April 5, 2011, (the "Hedging Agreement") with the Lender or counter-parties reasonably acceptable to the Lender on terms reasonably acceptable to Borrower and the Lender. Any liability of Borrower to Lender in connection with any such Hedge Agreement shall constitute "Indebtedness" under the Term Loan Commitment Letter. A breach of any Hedging Agreement shall constitute an "Event of Default" under the Term Loan Commitment Letter. All Hedging Agreements shall constitute "Related Documents" as defined in the Term Loan Commitment Letter.

 

 

By: /s/ John K. Schmidt                        

John K. Schmidt, its COO, CFO and Executive Vice President

 

 

April 5, 2011

 

Mr. David Horstmann

Senior Vice President - Finance

Heartland Financial USA, Inc.

1398 Central Ave

Dubuque, IA 52001

 

 

Dear Mr. Horstmann:

I am pleased to advise you that Bankers Trust Company, N.A, ("Bank") hereby commits to lend Heartland Financial USA, Inc. ("Borrower") up to $20,000,000.00 ("Maximum Credit") subject to the terms and conditions described below.

 

Heartland Financial USA, Inc., a Delaware Subchapter C corporation

 

$20,000,000.00 comprised of a $15,000,000.00 Term Loan and a $5,000,000.00 Revolving Line of Credit (the “Line”).

 

 

Locked on April 5, 2011, at a fixed rate of 5.14% for five (5) years to commence on April 20, 2011. In connection herewith, Borrower agrees to execute Bank's ISDA Confirmation Letter dated April 5, 2011, ("ISDA Confirmation Letter"), as acceptance of the terms and conditions of the rate lock and the International Swap Dealer's Association Master Swap Agreement.

 

The Term Loan interest rate will float at 1 month Libor plus 275 basis points with a floor of 4.50%

until the rate is locked. At the time Borrower elects to lock the interest rate through the Swap, the

4.50% floor rate shall be eliminated.

 

None.

 

None.

 

 

Monthly principal and interest payments based upon the Interest Rate, Loan Amount, and a l0-year

amortization period. The principal repayment schedule for the Term Loan will match identically the amortization schedule from Bank's counter-party on the Swap Agreement (attached hereto as Exhibit "A"). The maturity date of the Term Loan shall not exceed 5 years or the expiration of the interest rate swap. Any remaining principal and accrued interest shall be due at maturity.

 

Unsecured.

 

Borrower shall use the proceeds for the following purpose(s): capital injections from Borrower into its subsidiary banks and Citizens Finance, TARP repayments and other general corporate operating needs.

 

The Term Loan may be prepaid in whole or in part any time upon payment of an Early Termination Fee as fully described in the ISDA Confirmation Letter.

 

 

INTEREST RATE:

Floating at 1 month Libor plus 300 basis points, with a floor of 4.50%.

 

None.

 

Twenty-five basis points annualized on any unused portion of the Loan, payable quarterly in arrears.

 

Quarterly interest payments based upon the Interest Rate and Loan Amount (outstanding under the

Loan) in the preceding quarter. Should Borrower be fully advanced under the Loan, annual principal payments to achieve a 10-year straight line amortization period shall be required. The maturity date of the Loan shall not exceed 24 months.

 

Unsecured.

 

Borrower shall use the proceeds for the following purpose(s): capital injections into its subsidiary

banks and Citizens Finance, TARP repayments and other general corporate operating needs.

 

None.

 

 

Certification: A senior officer of Borrower shall submit a written quarterly statement of

compliance of all financial covenants on a form provided by Bank. All financial ratios will be

determined by the Consolidated Financial Statements for Bank Holding Companies - FR Y-9C.

 

Regulatory Capital: Borrower shall maintain on a consolidated basis the greater of the regulatory

definition for a well-capitalized bank or any other ratios deemed appropriate by Borrower's regulatory agent or the following ratios: (a) a "leverage ratio" (Tier 1 Capital to Average Total Assets) of at least 7.0%; and (b) a "total risk based capital ratio" (the sum of Tier 1 Capital and Tier 2 Capital to Risk Weighted Assets) of at least 12.0%.

 

Minimum ROA: Borrower shall maintain, on a consolidated basis, a minimum ROA of at least

0.50% tested quarterly on a rolling four (4) quarter basis.

 

Non-performing Assets to Tier 1 Capital & Allowance for Loan and Lease Losses: Nonperforming

assets to Tier 1 capital & allowance for loan and lease losses for Borrower shall not exceed

35.00%, measured on a consolidated basis, continuously, and certified in writing quarterly. “Nonperforming assets" shall mean, on a consolidated basis for Borrower, the sum of all Other Real Estate Owned, non-accrual loans, and loans on which any payment is 90 or more days past due but which continue to accrue interest.

 

Minimum Allowance for Loan and Lease Losses to Gross Loans and Leases: Borrower shall

maintain on a consolidated basis a minimum Allowance for Loan and Lease Losses to Gross Loans and Leases ratio of 1.25%.

 

Regulatory Non-Compliance: Borrower shall timely notify Bank of any material regulatory

violation or non-compliance. An event of default shall occur if the total number of Borrower's bank subsidiaries receiving less than satisfactory safety and soundness ratings, increases over the number so rated at the date of the Loan Agreement is executed.

 

Borrower shall establish a DDA account at Bank.

 

 

Financial Reporting Requirements: Quarterly call reports and quarterly consolidated financials

will be required from Borrower and its subsidiary banks. Consolidated Annual Reports will be required from Borrower, together with such other information as Bank may request from time to time.

 

Creditor Listing: Borrower shall provide a listing of all secured creditors.

 

Due Diligence: This loan commitment is subject to a satisfactory site visit and file review by

Bank.

 

Legal Opinion: Borrower's attorney shall supply Bank with a legal opinion opining on such

matters, as relative to this loan as required by Bank's attorney including all secured creditors.

 

Legal Fees: Bank shall use attorney prepared loan documents for the proposed loan. Said costs

shall be at Borrower's expense, not to exceed $12,500.

 

Pledge of Assets: Borrower shall not to suffer or permit the pledge or encumbrance of any of its

assets except as disclosed and consented to by Bank, with the exception of assets pledged to the Federal Home Loan Bank of Des Moines, the Federal Reserve Bank, or any other entity in the

ordinary course of business, and any Bank Owned Life Insurance plans.

 

Hazard Insurance: Borrower shall have in force hazard, fire and extended coverage insurance on

all property.

 

Occupational Safety Laws: Borrower shall not be in violation in any material manner of any

federal, state, county or city statutes, orders, rules or regulations pertaining to occupational safety.

 

ERISA Compliance: Borrower shall meet its minimum funding requirements under the

Employee Retirement Income Security Act of 1974 (ERISA), as amended, with respect to any employee benefit plan or other class of benefit plan, which the Pension Benefit Guaranty Corporation, established under ERISA (PBGC) has elected to insure, in either case, whether now in existence or hereafter instituted by Borrower.

 

New Entities: If Borrower causes new entities to be created to conduct business activities similar

to, or related to, Borrower's current business activities, such new entities shall immediately execute unlimited and unconditional guaranties of all liabilities owing by Borrower to Bank.

 

Misrepresentation: Any representation or warranty made by Borrower which proves to be

incorrect or untrue, or any financial information, schedule, statement, report or writing furnished by Borrower to Bank is untrue in any material aspect shall render this Commitment invalid in the Bank's sole discretion.

 

Loan Documents: This Commitment is subject to receipt by Bank of the Promissory Notes, Loan

Agreement and other loan documents which Bank may require, and no loan or advance shall be made to Borrower unless all of the loan documentation is executed and delivered in form and content acceptable to Bank. This Commitment is further subject to Borrower executing Exhibit “B" attached hereto along with this Loan Commitment Letter and the ISDA Confirmation Letter at the time of rate lock.

    

Expiration: This Commitment shall remain in effect until, and shall expire as of, the close of the

Bank's business on April 20, 2011.

 

Closing: This Commitment shall be deemed expired and void if, Loan Closing does not occur by

the close of Bank's business on May 30, 2011.

 

Assignment Prohibited: This Commitment is tendered only to Borrower and is not available to

any other party.

 

Termination of Loan Commitment: This Commitment may be terminated, in the sole discretion

of Bank (a) if Bank determines that any financial information, or any representations or warranties, or any other information given by Borrower, or any party on its behalf, is materially misleading or

inaccurate, or (b) upon the occurrence of a material adverse change in the financial condition of

Borrower or upon the occurrence of any other material adverse event not presently foreseen by Bank, in each instance, as solely determined by Bank.

 

Confidentiality: The terms and provisions of this Commitment shall be confidential between the

stockholders of Borrower and Bank. The contents and terms of this Commitment shall not be disclosed orally or in writing to any parties other than the stockholders or the attorney or accountant for Borrower.

 

 

Sincerely,

 

/s/ John Ruan, IV

 

John Ruan IV, Vice President

 

 

The above Loan Commitment is accepted by Borrower on this 18^th day of April , 2011.

 

 

 

HEARTLAND FINANCIAL USA, INC. (BORROWER)

 

By: /s/ John K. Schmidt                        

John K. Schmidt, its COO, CFO and Executive Vice President